MEGADEALER 100

Who says times are bad? Despite discouraging news coming from Detroit and a market that is as competitive as ever, according to many dealers, revenues for the nation's top automotive dealer groups reached record levels in 2004, continuing the heady years experienced since the late 1990s. Dealer groups on the Ward's Megadealer 100 reported total revenues of $123.8 billion in 2004 up from $116.6 billion

Who says times are bad? Despite discouraging news coming from Detroit and a market that is as competitive as ever, according to many dealers, revenues for the nation's top automotive dealer groups reached record levels in 2004, continuing the heady years experienced since the late 1990s.

Dealer groups on the Ward's Megadealer 100 reported total revenues of $123.8 billion in 2004 — up from $116.6 billion in 2003 and a considerable jump from $89 billion in 1999.

Fairly fast-paced acquisition strategies for the dealer groups, which have increased their dealership totals from 1,596 in 1999 to 2,078 in 2004, have fueled the revenue explosion.

The megadealers added 91 stores in 2004, led by Group 1 Automotive Inc.'s (ranked 5th) acquisition of 20 stores. The public groups expect to keep adding stores and revenues in 2005. United Auto Group CEO Roger Penske says the company will add $300 million in revenue this year with acquisitions.

Consolidation is not the only reason revenues are increasing. The Ward's Megadealer 100, which has ranked the top 100 dealer groups by total revenues for 18 years, reveals that individual dealerships are creating more revenue. In 1999, average revenue per store was $55 million rising to $59.6 million last year — up from $58.7 million in 2003.

Revenues from new-vehicle sales, finance and insurance departments and fixed operations each exceeded 2003 totals by more than $1.5 billion in 2004.

Despite record revenues, share of 2004 new-vehicle sales for the top 100 automotive dealer groups remained even with 2003 at 16.6%, according to data from the rankings.

Although their share of the new-vehicle market did not change, megadealers on the list did increase their new-vehicle sales by almost 30,000 units compared with 2003. Sales of new vehicles for the leading groups have stayed fairly consistent since 1999, hovering between 2.4 million and 2.8 million.

Dealers on the ranking expect the growth to continue. Cornelius Martin, (p. 17) says he has another 10 strong years left and is looking to increase his presence in fast-growing markets.

Meanwhile, Michigan dealer Joseph Serra (p.26) is adding three franchises and two new facilities this year. Long-time Ward's Megadealer 100 participant and former Ward's Dealer of the Year Bert Boeckmann reveals how his Galpin Motors continues to thrive despite Ford Motor Co.'s struggles (p. 30).

Megadealer Fast Facts

2,781,836 New units sold

1,866,285 used units sold

2,078 Dealerships

2,776 Franchises

Total revenue — Megadealer 100

$123.8 billion

Average Revenue per store

59.5 million

Average revenue per store — publicly owned:

$49.5 million

Average revenue per store — privately owned:

$69.1 million

Dealer Knew What He Wanted

One of 15 kids who grew up on a farm, he now runs 15 dealerships

By Cliff Banks

BOWLING GREEN, KY — Since his college days in the late 1960s, Cornelius Martin knew he wanted to be a car dealer. Now he's a megadealer, the head of one of the top dealership groups in the nation.

His company has exploded in size the last several years. Early in his life, Martin, an African American growing up on a farm, thought owning a garage and working on vehicles would be the best he could do. But working in a dealership cemented his love of the business and convinced him he could do more.

Today, Martin Management Group with annual revenues of $372.4 million, is No. 86th on the 18th annual Ward's Megadealer 100, the oldest and most comprehensive ranking of the country's top automotive dealer groups.

His first love is cars, though. He was 14 and living on a tobacco farm in Greenville, KY when he and a brother (Martin is the youngest of 15 children) bought a 1957 Ford with the money they earned.

The brothers transformed the car into a tuner. “Of course, it wasn't like the kids do it today,” laughs Martin referring to eye-catching wheels, spoilers and assorted aftermarket accessories. The vehicle didn't last long. It was wrecked in a year.

In 1968, Martin started working at a General Motors dealership washing and fixing cars. He then attended Wright State University in Dayton, OH in 1969. He left after a year to work full time at the dealership.

In 1977, Bob Shannon, owner of the Dayton Shannon Buick Co. began recruiting Martin to be a service technician for him. By then, Martin had determined he wanted to own a dealership. He figured he could pull it off. But for an African American in the 1970s, owning a dealership was a bold and ambitious notion.

Martin, who was 29 years old at the time, told Shannon he wanted to be a car dealer, and that he would work for him if Shannon would help set him up over time to own a dealership.

Shannon agreed. For the next several years, Martin worked a methodical plan at the Buick dealership running the service department for three years and then selling cars for three years with the intent of learning the business.

Even with Shannon's mentorship, it was not easy. Not only did Martin have to overcome the challenges that come with being African American, he also had to deal with resentment of co-workers because of his deal with Shannon.

“The office politics were certainly an issue,” Martin says. “Sometimes, fellow employees didn't see the hard work or long hours, they only saw the results that came from that hard work.”

Martin stuck with it. By 1983 he graduated from General Motors Dealer Academy in Flint, MI and began looking for an opportunity. But he did not jump at the first opportunities presented and even turned down one in Buffalo, NY.

Instead, Martin meticulously studied the growth trends of several cities, narrowing his choices down to St. Louis and Bowling Green.

He settled on Bowling Green because of its low unemployment rate and the growing population. In April 1985, Martin purchased his first store, an Oldsmobile-Cadillac dealership that was averaging a modest 20 new-and used-vehicle sales a month.

Martin transformed the dealership through renovations, aggressive marketing and extended business hours. By 1990, he began building on that success and acquiring other dealerships.

In an interview at his office in the Martin Cadillac Kia dealership (he added the Kia franchise when GM eliminated the Oldsmobile brand) Martin answers questions thoughtfully.

He does not mention the challenges he encountered except when prodded. He handles those questions matter-of-factly. He believes it is more difficult to become a dealer today then when he bought his first store.

“Getting the financing to buy a dealership is so hard today,” he says. He used approximately $60,000 of his life savings along with $650,000 in capital from GM and banks to buy the original dealership.

Today, he notes, the personal investment can run in the millions of dollars to acquire a dealership. In fact, Martin has been stymied in attempts to get into some markets because of the huge investment required.

“Just too much money,” he says. Also: “Some markets are tougher politically to get into than others.”

Being flexible is part of his strategy. “When buying a store, you need a Plan A, a Plan B, and sometimes a Plan C,” he says. “Sometimes Plan C is deciding not to buy.”

Martin has branched out across the country with dealerships in California, Arizona, Ohio, Iowa and West Virginia.

Raising capital, hiring the right people and dealing with particular legal environments are some of the challenges he cites.

“How do you prevent possible lawsuits?” Martin asks. “Sometimes you're shooting in the dark. We're constantly monitoring our people and looking to hire the best. And we try to develop strong processes for our team.”

Martin never buys a dealership without doing his homework first. The store must be strong, even if it's poorly run.

He determines the health of the franchise, studies the long-term forecasts, demographics and growth trends of the area before investing. As with any successful businessperson, Martin's instincts are an asset.

For him, the health of the franchise is critical. “So much of a dealership's profitability depends on the franchise,” he says. “Performance of the manufacturer affects the profitability of the dealership.”

Revenue for his stores was down in 2004 from 2003, and that includes the return on investment, says Martin. Some of that is because of the troubles facing some of the domestic brands, specifically GM. Like other dealer groups, Martin is looking for more import opportunities to compensate. But there are few of those dealerships available.

He is excited about the Saturn brand, however. “Its future is bright,” he says.

There is a set process in place for when the Martin group acquires a dealership. Six vice presidents will take the operations and administration teams into the new store for a few days to introduce the group's processes for conducting business, otherwise known as the Martin Doctrine.

“We have strict controls and reporting processes,” says Martin. “There is a common policy manual that everyone has to follow from day one.”

Martin, 56, and his wife Gail have two children in college and one in high school. Martin is not sure if they will follow him into the business. “We'll look at it in the next 5-7 years,” he says. “Probably, we'll have them work for someone else to work their way up the ladder, and then bring them back here.”

As for himself, he says, “I figure I'm good for another 10 years at least.”

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